DIGITAL, BANKING

Digital Transformation in Banking: Trends & Techniques

July 13, 2021

Digital Transformation in Banking Industry

The process of integrating digital technologies into all aspects of a business to meet the market demands and changing business requirements can be considered as one main aspect of Digital Transformation. The main objective of this transformation is to increase the effectiveness of business operations and customer experience. Organizations will have to invest in upgrading the systems, updating the processes, knowing the risk better and reduce the time to market.  

To compete with digital natives, banks should provide an end-to-end digital experience to their customers by leveraging necessary technologies. 

Why is digital transformation important? 
Banks understand that Digital is the go forward! 

A survey conducted by Deloitte has found that more than 22% of the customers use online services and mobile applications for financial transactions. 

Deloitte Insights

Source: Deloitte

The below image is a survey that is conducted by BCG that also supports this hypothesis. 

BCG Survey

Source: BCG

According to a survey conducted by Mckinsey across financial service executives across the world believe enhancing customer experience is the top priority for digital transformation projects, 76% of participants value investing in customers while 16% prioritizes productivity and operational cost reduction in digital transformation strategy. 

Competition from Non traditional, technology giants 

Tech Giants such as Google and Apple are making huge strides in financial services industry. Both of them (and Amazon) have payment gateways, Apple launched its credit card and Google is planning to introduce consumer bank accounts

And there are a lot of digital native, new age digital first micro and macro lending fintech companies. 

These companies and their obsession on customer and seamless integration of payments within customer journeys and more importantly existing customer dataTech Giants’ involvement in banking is threatening for banks because these companies have most individual’s data and are experts in digital transformation and data analytics.make it really difficult for traditional banks to compete Now that we’ve established the fact that banks are being pushed to take the digital transformation route, let us look at a few key processes that are helping with this journey .

 

 Technologies and trends to enable banking digitization 

Digitization

The journey of digitization begins for the banks by providing best in class online and mobile applications by migrating from legacy systems to the latest technologies. Though the pace of transformation and tech maturity will depend on the bank’s strategy and how it wants to adapt the technology. While the core banking systems continue to exist and are robust and mature, there are additional wrappers and applications that are being created and used for customer interaction .

Automation

Automating repetitive tasks can help organizations: 

  • Increase the efficiency of processes because it prevents human mistakes 
  • Reduce operational cost by lowering the number of workforces 
  • Focus on more important tasks that involve decision making 

Organizations are revisiting their existing processes to identify opportunities for process improvement which also includes digital transformation and automation initiatives. 

Advanced analytics and machine learning 

Financial institutions are required to maintain the historical data of customers for certain years due to regulatory needs . Analyzing data can reveal insights about customer behavior so that organizations can improve the experience they provide for customers. For example, a common analytics application in banking is personalization. A banking product is worthwhile only when it reaches the right customer at the right time through right channel and this could be made possible using advanced analytics. 

Blockchain

Risk has always been the center piece for banks. In that light, Blockchain is something that all banks are keen on. When used and applied right it can help with fraudulent transactions, provide transparency. Image below shows the estimate of Mckinsey about potential savings in banking with blockchain solutions. 

McKinsey Insights

Source: McKinsey

Conversational AI: Digital financial assistants 

Chatbots has been a trending across industries and financial institutions have embraced the chatbots for various functions like customer service like transactions and balance details, recommendations for investment, offers in various segments.  This new non obtrusive channel is something that the younger population would prefer. Also helps with reduced wait time and manual intervention of agents for regular / standard issues. 

McKinsey Reports

Our customers in this space

As RoundSqr, we have been working with customers across the globe on banking projects. Our teams built a AI/ML intervention that helps understand the spending pattern of customers using non traditional data like text messages, bank statements and external data (with consent from users) for faster decision making and reducing the Time to Cash for loan applicants in SME business segment 

Our teams are embedded into a digital transformation program that a bank in Caribbean is currently undertaking. This program includes everything right from understanding the as-is process to the data architecture refresh to review and implement ML interventions in lending journey across consumers and non consumer segments